In line with my advocacy to spread financial education, I would like to share my notes to my blog readers. Although not complete, I believe readers should be able to learn a thing or two from this.
Speaker: Mr. Hans Sicat, President of the PSE
Keynote Speech
The PSE is taking part in the Invest Asean initiative.
The "Invest ASEAN" intiative includes:
- an ASEAN Exchanges website
- the creation of an FTSE ASEAN Index series
- an ASEAN trading link.
Right now, the ASEAN trading link only involves 3 markets -- Malaysia, Singapore and Thailand. Basically, a trader/investor in one country can now easily buy shares of stocks in another country. This is good news especially to those who want to diversify in the global market. The Philippines, together with 2 more countries, are expected to be included on the next batch.
PDS stake acquisition
According to Mr. Sicat, the PSE is also getting involved in the bond market through the Philippine Dealing System (PDS). With the acquisition of the majority shares of PDS, we can look forward to lower fees for the bond market.
Speaker: Robert Stammers, CFA
Topic: Retirement Security Problem
Longevity Risk
Longevity risk is living past the life of your useful assets (or what you've saved for your retirement). Based on statistics, life expectancy for men is now at 78, while 80 for women. With the advancements in the field of medicine, people are now living longer (and this means you need to save more for your retirement).
On developing fiscal discipline
- create a household budget
- learn to save before you spend
- track your spending
- build an emergency fund (3-6 months of monthly household expenses)
- keep the cost of your lifestyle constant (put windfall income to savings/investment)
- manage your debt (before pursuing the savings plan)
Investment Tips
- Diversify on global stocks and bonds for risk mitigation
- Make consistent capital contributions -- if you keep on waiting for the right timing, there's a higher chance that you'll miss out the best days of the market
- Purchase low cost financial products (in terms of management fees and other charges)
- Think long term (financial planning is a marathon, not sprint). It takes 20-25 years to establish fund for 20-25 years of retirement.
Speaker: Tolmas Wong, CFA
Topic: IPS - Investment Policy Statement
On Diversification
Diversification without really thinking is like building a zoo. When diversifying, ensure that when an assett class goes down, another one will go up to offset the losses.
On Market Timing
You can't time the market. For most average investors, regular saving and regular investing is recommended.
Pitfalls in retirement planning
- Too little -- magic of compounding will wane
- Too late
- Too conservative
- Too haphazard -- leaving everything to chance
On cutting losses
Cutting losses at 10% compared to cutting when you're already down 50% gives you a better chance of recovering faster. Take note that if you cut when you're already down by 50%, that means you need to gain 100% in order to breakeven.
Panel Discussion
Topic: Frauds, Scams and Consumer Protection
On Investment Scams
There are 37 pending cases in court related to investment scams.
The public is not vigilant on the products that they invest in. Before going into an investment scheme, ask yourself: Why is it giving returns better than the market?
Common investment scams:
- Pyramiding scheme (sellling/recruiting)
- Ponzi Scheme/Affinity Scam
From SEC Chairperson Teresita Herbosa: Based on the Supreme Court Decision, even if you're not the the mastermind of a scam, even if you're just an employee or just tasked to make the presentation, you are considered as an ostensible agent for the mastermind and will be held liable for the violation of the securities law.
How to report a scam:
SEC - you can even use a dummy email if you want to maintain anonymity
BSP - Financial Consumer Department
Check "Alerto Ako" for tips.
Speaker: Robert Ramos, CFA
Topic: 12 Common Mistakes in Investing
1. No investment strategy
2. Investing in individual stocks instead of in a divesified portfolio of securities
- mutual fund diversification is not portfolio diversification
- by investing in same investments from different banks, you are over-diversifying
3. Investing in stocks instead of in companies
4. Buying high (avoid performance chasing. Instead, invest in the asset because of the sound fundamentals)
5. Selling low (due to holding on to investments, so make sure to have a stop loss)
6. Churning your investments (frequent trading cuts into investment returns)
7. Acting on tips and sound bites
8. Paying too much in fees and commissions
9. Decision making by tax avoidance (tier 2 investments are exempted from tax)
10. Unrealistic expectations
11. Neglect (failing to begin investing due to lack of knowledge)
12. Not knowing your investment risk tolerance
Should i have stop-loss for UITF and MF?
You must have stop-loss for everything, especially if you'll be needing the money in the near future.
Panel Discussion
Topic: Risk and return outlook of stocks, bonds, properties and private equity
4Q 2015 or 1Q 2016, most likely bond rates will increase
Is there a property bubble in the Philippines?
Not really. Real estate, in the next 3-5 years, is a good investment
On Private equity
Involves companies that are not publicly listed (illiquid and for long term). Minimum investment is 1 million dollars
Investment Tips
If you're still young, allocate more on growth assets (60-70% on equties). If you're older, objective is capital preservation.
It's time, not timing, that determines your personal wealth.
In case of fed rate hike, buy on dips.
When interest rates go up, it's bad for the real estate market.
If you have 50K pesos, you may invest 100% equities, BUT "It's not your age that matters, but when you'll need the money".
How much of your monthly salary should go to mortgage? -- Not more than 25%
Outlook for 2016 election and how it will affect the stock market? -- 70% of filipinos contribute to consumer spending. Regardless of the president, Filipinos will still spend.
Speaker: Marvin Fausto
Topic: Analyzing Mutual Funds
Balance Qualitative vs. Quantitative
Qualitiative
1. Why (Your purpose? Your goal? Emergency fund? College education? Vacation?)
2. Who (Fund house? How long the fund is in existence? How long has the fund manager been overseeing the fund?)
3. What (Investment objective of the fund? What kind of investment will the fund invest in? What is the investment style? What is their process in choosing investments?)
Quantitative
1. Performance -- historical performance
2. Risk -- standard deviation of returns
3. Risk / Return - Sharpe ratio (formulated by William Sharpe)
4. Fees - expense ratio
COL Fund Source
Participating Mutual Fund Companies:
SunLife Financial
Philequity
ATR Kim Eng
ALFM
FAMI
Philam Asset Management
There are 24 mutual funds offered in the COL Fund Source.
According to studies, only 6% of those who learned Financial Literacy improved.
Difference between Mutual Fund and UITF
UITF is being regulated by the Central Bank. MF is being regulated by the SEC.
Speaker: Noor Quek
Topic: Preserving Family Wealth Through Generations
Is it ok to transfer your assets to your children while you are still living?
Although it can show how much you love your children, it was suggested that parents should also learn how to use and spend the wealth they've established, after all, they've worked for it for many years. It's just right that they also reward themselves. As long as they were able to give their children good education and taught them the right values, that should be enough. Children must also learn how to work for themselves.
The problem with transferring the assets too early
If you give your assets too early to your children, in case the child dies, you'll have a problem taking back what you gave him/her. Problems can arise especially if your child is already married. Your wealth will surely go to the spouse.
From clogs to clogs
This often happens: parents start from scratch, children inherit the wealth, then spend the family's wealth.
On passing your business to your children
Parents should not force their children to take on their business, especially if that's not what they want to do. In addition, parents should know when to act as business owner and as parent to their children.
If the parent thinks that his/her children cannot handle the business, it's ok to just sell the majority part of it, but still holding on to substantial number of shares, so the parent will still be able to receive earnings.
From Ms. Rose Fausto: For the money you receive for your child, put it in a savings account (or investment) so it won't comingle with your money. Home , Mutual Fund
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